The newly approved tax on legal entities has many Costa Ricans feeling disgruntled. This tax, which is known as the Corporate Tax Law, will take effect shortly. In basic terms, this law means that if a resident of Costa Rica owns a home, car, or some other type of personal property in an inactive company, that person must pay an annual tax on that company, even though companies with inactive status pay the lowest rate.

the cold hard justice / gavel on the blue surface / this judge means business

Since so many locals have disapproved of this new tax, the Costa Rican government is giving them one chance to transfer personal property without paying a penalty or any tax during the first year after the law becomes active. Unfortunately, these two factors are the only things that people know when it comes to this new law.

In a detailed report, officials explained that for exemption status, companies must be inactive for a minimum of 24 months before the enactment of this law. That means that if a holding company qualifies, the owner can use this one-year window to transfer property into his or her name or into a different company that has no tax payment or transfer cost.

In addition, companies with outstanding payments due from the time when the tax formerly went into effect (2012 and 2015) can pay without facing penalties or internet charges. On the other hand, if a company lapsed in payment three years in a row, it will be dissolved. If that happens, the company is required to go through a special process for recovering titles and holdings.

For Costa Ricans with pending payments associated with the prior law, they are encouraged to talk with an accountant or attorney in determining the best course of action. The official report stated that the approved methods to pay the tax will be announced publicly, as soon as the new law goes into effect.

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Daveed Hollander is a Costa Rica Realtor living in Dominical on the Southern Pacific coast. Daveed has lived here for ten years, is a legal resident of Costa Rica, a member of the CCBR here in and of NAR, GAR and CIPS.